Ind AS 23 – Borrowing Costs
IND AS 23 ? BORROWING COSTS
INDEX
Core Principle New Concept Example New Disclosure Illustration Disclosed First Time Adoption Challenges
CORE PRINCIPLE
Borrowing costs that are directly attributable Acquisition construction or Production of a qualifying asset form part of the cost of that asset.
A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.
NEW CONCEPT
Ind AS 23 recognize the concept of "group borrowings Costs" by stating in Para 15 that
"In some circumstances, it is appropriate to include all the borrowings of the parent and its subsidiaries (the Group) when computing a weighted average of the borrowing costs;
in other circumstances, it is appropriate for each subsidiary to use a weighted average of the borrowing costs applicable to its own borrowings."
EXAMPLE
Parent Co. "A"
Liabilities
Assets
Equity
50 Cr. FA
50 Cr.
Loan
100 Cr. Investment 100 Cr. Subsidiary B
Subsidiary Co. "B"
Liabilities
Assets
Equity 100 Cr. CWIP
Loan
50 Cr. Bank
Reserve 1.63 Cr. Advance & Surplus *
CWIP is Qualified Asset
131.63 Cr. 10 Cr. 10 Cr.
Profit & Loss Account
Finance Costs
4.47 Cr.
Profit & Loss Account
Finance Costs
1.05 Cr.
Weighted Average
of
Borrowing costs is 14.52%
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